Globalization Transforms Trade-Migration Equation

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Globalization Transforms Trade-Migration Equation

December 1, 2002

Feature

By

Charles B. Keely

The flowering of economic globalization has seen the development of unprecedented interconnection between immigration on the one hand, and increased trade capacity, competitiveness, and employment policy on the other. Corporations and governments alike are being forced to adjust to this new reality, particularly as it relates to labor flows.

For their part, government policy makers face urgent questions about how to maximize the benefits of migration, while minimizing potential drawbacks. At the same time, international personnel movement — a strategic concern of top executives - is spurring firms toward innovation in business organization and practice.

But despite ample reasons for increased linkage, a gap remains between migration policy and trade policy. This manifests itself in various ways, from the absence of international migration regimes, to immigration controls that effectively function as non-tariff trade barriers. The lack of coordinated policies also has an impact on firms as they adapt to globalization by applying new migration-linked human resources techniques. Examining these phenomena illustrates just how closely migration and trade are related in this era. It also demonstrates how neglecting to coordinate trade and migration policies can create obstacles for both countries and firms.

A Missing Framework

Maximizing the rewards of labor migration depends, to some extent, on a functioning international framework. However, no international regime exists for migration comparable to the World Trade Organization (WTO), whose complex machinery and rules regulate international trade agreements, dispute resolution mechanisms, ongoing rounds of trade talks, and global trade regimes. The purported goal of this set of international agreements, behaviors, and institutions is to bring about "free" trade. But in light of the complicated rules, it is misleading to describe it as "free" rather than as "regulated."

In comparison with global trade, international migration is in a sense both less regulated and less free. Examples do exist of bilateral and multilateral agreements on "free" or highly facilitated movement between countries, such as those between Ireland and the United Kingdom or New Zealand and Australia. Moreover, there are regional agreements, most notably that of the European Union, which allow citizens of member states to live and work in other member states. In addition, there are elements of a global refugee regime that suggest how refugees should be treated, but in the end lays down no requirements for states to permit the entry or settlement of refugee status claimants. States freely enter into such agreements in limited contexts.

In general, however, individual countries reserve the sovereign right to set their individual immigration policies. Control of borders is viewed, even by many advocates of "free" trade, as an inherent part of sovereignty. There is very little questioning of this orthodox view, even when national immigration controls limit flows of one factor of production — people — in much the same way that tariffs limit flows of goods.

Borders as Barriers

Immigration controls and trade barriers are similar in that they restrict supply of a factor of production, increase prices, and subsidize and protect the labor sector of the country that imposes such restrictions. That virtually every country restricts entry in some way does not change the economic impact of restricting labor flows. It merely means that nearly every country imposes non-tariff-like barriers when they restrict immigration.

These barriers set up a potential economic clash in cases where international trade regimes regulate the movement of people. One example of such regimes came out of the negotiations in the Uruguay Round of the General Agreement on Trade and Services (GATS), which introduced an innovation that makes clear the aptness of the analogy between trade barriers and immigration controls.

"Negotiations on the movement of service providers have been slow and contentious, and illustrate how the integration of immigration policy decisions into trade negotiations is still in its infancy"

To carry out trade in services, the agreement recognizes four modes of delivering them. First, a person can go to a country and receive the exported service (e.g., a medical operation) and return home. Second, a firm can sell a service without the buyer or seller leaving their respective countries (e.g., certain types of insurance policies or financial transactions). Third, a service-providing firm can set up a facility in another country (e.g., banks or consulting firms). Fourth, the person in the role of the service provider may move from his or her own country to perform the service in another country, and then return home. In GATS jargon this is referred to as the movement of a "natural person" (as opposed to a "juridical person" like a firm or subsidiary).

Under the rules of this agreement, therefore, countries whose immigration laws restrict the movement of service providers have erected a non-tariff barrier to trade in services. Immigration and trade policy thus collide head on. Negotiations on the movement of service providers have been slow and contentious, and illustrate how the integration of immigration policy decisions into trade negotiations is still in its infancy.

Employee Movement and Competitiveness

As an increasing number of firms become more global in their operations, the relationship between migration and trade has become a fundamental issue of competitiveness. For companies that manufacture goods and those that primarily deliver services, and all shades in between, operating globally requires movement of international personnel. This includes taking on non-citizen new hires and moving current employees internationally for both short and long-term assignments.

By definition, global firms operate in an international context. They make decisions on manufacturing, research and development configuration, distribution, and management development for global operations based on the assumption that their employees will be citizens of many countries and will of necessity occasionally need access to countries other than their own to perform their assigned duties for the firm.

Training managers for future leadership, for example, requires international experience and foreign assignments. Research and development teams and marketing teams for multi-country introductions often require international groups to work together on projects for extended periods. Joint ventures often demand relocation. Many firms seek to hire scientific specialists with advanced degrees from top universities who often are not nationals of the base country of the hiring company. Training in facilities management for specialized manufacturing facilities or training in financial controls used throughout a multinational firm may require extended training of foreign personnel at a regional or headquarters site in a country other than their own. Indeed, international experience is now a prerequisite to climb the corporate ladder in many firms.

In the long term, without closer coordination of trade and migration policies by governments and international bodies, firms will be harder and harder pressed to meet their increasing need for more permeable borders that allow the flexible and fleet movement of high-skilled employees like the ones mentioned above.

"Just in Time" Labor Flows

In pursuit of competitiveness, many firms have already reduced costs, increased quality, and shortened the time to market for new or modified products. One area of international business that does not yet mirror this rationalization of global operations, however, is human resources. This sector has yet to become an area of routine strategic analysis and decision-making by top corporate leadership.

In this context, international mobility is still typically seen as part and parcel of a staff operation in human resources. Human resources professionals and lawyers are left to navigate immigration law and facilitate movement of personnel. However, this eliminates the opportunity for firms to apply a relatively recent business innovation: the "just in time" method.

Storing inventory in a warehouse is expensive, so "just in time" manufacturing techniques were developed to minimize the gap between production and delivery to the customer. However, despite their success in improving product delivery and reducing costs, such concepts have not been applied to the "just in time" delivery of necessary skills. Money, time, and competitive edge are squandered when skills, experience, and knowledge (some of it firm-specific and otherwise unavailable outside the company) are not efficiently and rationally utilized.

The question remains, however, whether "just in time" methods can be used with maximum efficiency as long as contradictions exist between trade and migration policies at national and international levels.

Managing Intellectual Property

That employees are a company's most valuable asset has a basis beyond corporate sloganeering. Thinking of the international mobility of managers and highly skilled people in research and development, marketing, and other areas critical to corporate management and growth would be yet another globalization-spurred innovation along the lines of "just in time" production techniques. In fact, international competitiveness will demand attention to human resource management and mobility as part of intellectual property management as a profit sector in the very near future. The development of both a mindset and the organizational technology to successfully exploit the human resources profit center potential requires developing ways to measure the true success of the deployment and use of employee skill sets.

The ability to make evaluations on the basis of measured results is typically necessary to sufficiently raise an issue's strategic importance in order to garner high-level executive attention. However, there is still no case study or successful set of guidelines in the area of global personnel mobility. Many firms suspect this and are paying more attention to personnel movement. At this point, firms focus mostly on operational and cost issues, narrowly conceived. These include the cost of transfers for longer-term assignments vs. using shorter-term business trips to accomplish the same objectives. The issue, of course, is whether the methods used are able to accomplish the goals and deliver the same value to the company and the employee.

While these are certainly areas of concern, the focus is too confining. A broader vision is necessary and new organizational technology needs to be developed to rationalize resource allocation, use, growth, and retention of intellectual property assets embodied in valuable employees. Government migration policy that recognizes and rewards this vision will be crucial to its successful realization.

Tying Trade to Migration

Seen in the light of these various challenges and opportunities, migration for employment purposes is part of a government's trade policy and economic policy related to competitiveness and employment. Immigration was never simply a matter of admitting people for family, occupational, or humanitarian reasons with little or no economic, employment, or trade impacts at the national level. It is also not an isolated matter of deciding whether, how many, and what kinds of immigrants to admit and the myriad regulations affecting their employment status. Nor is it simply a matter of private interests of firms alone with no further national implications for the economic health of the country.

This approach does not require extreme steps such as throwing opening doors or eliminating all immigration regulation. It is more akin to changes in thinking about moving trade policy from a protectionist approach to a more open approach. Trade has not become deregulated or thrown open to any and all practices. Likewise, immigration policy needs to be seen as a wider field beyond social policy about population composition. It is also economic policy. Increased trade capacity, competitiveness, and employment policy are inextricably tied into migration to a degree beyond what existed before the expansion of economic globalization. The great age of migration may still be in the future.